You may have recently lost a loved one. This may require the settling of an estate and dividing assets. One of those assets may include a private mortgage note. You might not have planned to sell a private mortgage note in your lifetime, but now that your relative has bequeathed you one or left one behind as part of their estate, you may have to reconsider.
For many possible reasons, selling a private mortgage note that you inherited can be pretty overwhelming. You either want to cash in on that note (to mitigate risk and avoid collecting payments for years to come) or use the proceeds to pay for the funeral, burial, or other debts and accounts your loved one left unpaid.
By the end of this article, you will know that:
- You can sell a mortgage note that you have inherited, either in whole or in part.
- Generally, you won’t be able to do this until the deceased person’s estate has gone through probate, a legal process designed to validate the will and address any debts the deceased had, and to ensure their assets are distributed to the right people.
- Other than selling the note to an investor, you can also give the payor the opportunity to refinance with a conventional lender, and pay out the note to you with that lender’s money.
Not so fast on that private mortgage note sale
Unless your loved one rolled their assets into a living trust, you will likely need to take their estate through the probate process before you can sell their mortgage note. This process is designed to 1) settle your loved one’s debts, 2) transfer their assets to the proper parties, and 3) see that their will and last wishes are honored.
When you inherit a private mortgage receivable, the probate process is what will clear the property’s title and give you the legal power to actually sell the note, transfer it to a buyer and collect the proceeds from that sale.
You might be able to contact a note buying company and get a quote for your note before this, but once the property’s title is pulled and the buyer sees the asset is still tied up in a deceased person’s estate, the deal will screech to a halt until the probate process has been settled.
Why probate is necessary — and how it works
All in all, the probate process usually takes a few months, though it depends on how complicated the estate is and how many parties are involved along the way.
Generally, you can expect the probate process to look something like this:
1. You’ll file a petition in the probate court where the deceased person lived. The petition is simply the formal presentation of the person’s will to the court.
2. You’ll take inventory of the deceased’s estate, including any property, assets, accounts, investments, or savings they may have had. You will also need to know balances on credit cards, loans, and other debts.
3. The deceased’s assets will be used to pay off any creditors and debts, as well as the costs of funeral expenses. If there is not enough cash to cover these costs, physical assets will be sold off and liquidated to pay the remaining balances.
4. Finally, the remaining assets are transferred to those named as beneficiaries in the will. Once this process is over, the beneficiary can then do with those assets as they please. If a mortgage note is included in these assets, they can collect on the note or sell it to a note buyer and keep the proceeds.
Most of this process will need to be handled by an executor — along with an estate attorney. The executor is the person named in a will to ensure it is fulfilled. It’s often the surviving spouse or a surviving child of the deceased.
How much can you sell a mortgage note for?
If you’ve inherited a note, consider reaching out to a note buyer for an estimate on what your private mortgage may be worth on the open market.
When selling a private mortgage, you have several options. You can sell the entire note and all remaining payments in a full purchase note offer or you have the option of selling a portion of the note, called a partial purchase note offer.
Process for getting a private mortgage note quote
In order to determine what your options are when selling real estate notes it is advised to have the following information:
1. The promissory note
2. A copy of the mortgage, mortgage deed or deed of trust
3. Closing documents
4. The note’s balance and terms, including length, interest rate, etc.
5. Payment history records on the note
Keep in mind that the probate process can take many months or a year in some cases, so there’s a chance your note’s worth may change (or even increase) by the time you can legally sell it. Use your quote only as a guide, and be sure to get a new one once you’ve finished the probate process and have the legal power to sell it to a buyer.
Selling your mortgage note isn’t the only option you have when inheriting a note. You can also give the buyer the chance to refinance with a traditional mortgage lender if their credit is good enough. This would pay off your remaining balance on the note, and transfer maintenance of the loan over to the new lender or servicer.
Still, this isn’t always an option — especially if the borrower has less than perfect credit. Want to know what your inherited mortgage note is worth to real estate note buyers instead? Need more guidance on selling a mortgage loan note that’s been inherited? Contact Amerinote Xchange today.
The bottom line
You can sell a mortgage note that you inherited, but not before the probate process clears the deceased person’s assets and hands them over to the proper inheritors. You can sell all or part of the mortgage note. Be sure you are aware of the tax implications of both these types of sales.